The government lacks the drive to enforce its latest Labour Market Enforcement Strategy, employment status experts have said.
The new strategy, compiled by director of Labour Market Enforcement Margaret Beels, recommends a multi-agency, joined-up approach to be adopted to tackle issues such as modern slavery, minimum wage and tax avoidance, the regulation of umbrella companies and exploitation in sectors including agriculture, construction, care and agency working.
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Beels noted early in the report that “progress on establishing a single enforcement body for labour rights, a previous commitment for this government, has stalled with no sign that parliamentary time will be found during the term of this government”.
She said: “Several benefits would have stemmed from a new overarching enforcement body, including making it easier for workers to know where to go for help, more effective use of resources and pooling of intelligence, better support for compliant employers, and new powers and sanctions. Crucial enforcement gaps – such as enforcing holiday pay for vulnerable workers and regulation of umbrella companies – remain outstanding.”
She highlighted how an employment bill “could also have sought to tackle the ongoing uncertainty over employment status, aligning tax and labour law approaches, and in doing so helping those working in the growing gig economy and other sectors.” She said she “shared the disappointment of most stakeholders” that little progress had been made on a bill or on a single enforcement body.
Enforcement
In the absence of these measures, she urged ministers to analyse and identify how existing enforcement bodies could work together more effectively. Stakeholders would include the Low Pay Commission and Acas, as well as with the UK’s devolved administrations, she said.
Julia Kermode, CEO of umbrella company compliance specialist, PayePass, said she could sense “the frustration of Beels, who quite rightly expected more support from the government, which is to blame for this ridiculous delay.”
Beels criticised ministers for failing to act on strategies her and her predecessors in the role had delivered. This had “delayed useful progress addressing harm to vulnerable workers” and had weakened support for compliant employers, raising questions about the value added of my function.”
Beels added she was addressing ministers at the Home Office and the Department for Business and Trade as to how improvements might be delivered.
The strategy was delivered against a context of increases in modern slavery referrals and a slew of statistics relating to the minimum wage, economic performance and recruitment. Figures from the National Referral Mechanism for all types of modern slavery suggested there were now around 4,000 referrals per quarter, a fourfold increase since 2016. “Severe labour exploitation,” the report stated, “showed little sign of reversing its continued upward trend”.
Beels reported that in small firms with fewer than 50 employees almost 12% of employee jobs were paid at or below the minimum wage. This compared with just 3% in large firms (250-plus employees).
By volume of jobs, retail, hospitality and cleaning and maintenance had the highest volumes of jobs paying below the minimum wage, representing between 1.5% and 3% of all jobs in each of these sectors.
The government isn’t committed to tackling worker exploitation and ultimately, it’s workers who pay the price of this startling lack of action” – Julia Kermode, PayePass
The report warned that non-compliance in paying the minimum wage could rise as a result of the “marked rise” in the national living wage and minimum wage in April this year.
Relying on Recruitment and Employment Confederation figures, Beels stated that compliance risks in the recruitment sector were more difficult to judge, because the market had been subdued over the past 18 months. However, the report stated, “signs of a pickup in temporary hires may well reflect caution on the part of business in an uncertain economic climate”.
Further recommendations were aimed at helping workers better understand their employment rights, particularly younger staff, and those “hard-to-reach” workers, such as office cleaners, whose support was most likely to be in community and ethnic groups rather than colleagues.
Holiday pay
Beels highlighted that there remained “crucial enforcement gaps – such as enforcing holiday pay for vulnerable workers and regulation of umbrella companies”. She added that an employment bill could also have tackled uncertainty over employment status, aligning tax and labour law approaches, thus helping those working in the growing gig economy.
Westminster has no intention of solving these issues any time soon – arguing that the benefits of creating a new employment status framework are outweighed by the disruption it may cause” – Seb Maley, Qdos
Kermode was highly critical of ministers in the wake of the strategy’s appearance: “Continually kicking the can down the road on key issues such as umbrella industry regulation and failing to ensure the UK’s 1.6 million temps receive holiday pay tells you everything you need to know. The government isn’t committed to tackling worker exploitation and ultimately, it’s workers who pay the price of this startling lack of action.”
Seb Maley, CEO of employment status organisation, Qdos, added: “This strategy makes clear that the government understands that the ambiguous nature of employment status is leading to challenges, both for workers and businesses. But it also spells out that Westminster has no intention of solving these issues any time soon – arguing that the benefits of creating a new employment status framework are outweighed by the disruption it may cause.
“When it comes to reform, there’s an urgent need to align employment status with tax status. It would put an end to the injustice that is zero rights employment – which occurs when a contractor is placed inside IR35, where they are taxed as an employee but don’t receive any employment rights in return.”
Crawford Temple, CEO of Professional Passport, a prominent assessor of payment intermediary compliance, said: “Ms Beels has a hard task on her hands. It’s an uphill struggle for sure but we must take the steps to overcome the challenges that the labour market is facing in all its guises.”
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